Net profit returned to mother increased 24% in '23, and increased 22% in 24Q1
The company released financial reports. The 24Q1 revenue was 600 million, up 29% year on year; net profit to mother was 40 million, up 22% year on year, and net profit from non-return to mother was 0.3 billion, up 45% year on year.
In 2023, the company's revenue was 2.7 billion yuan, up 36% year on year; net profit to mother was 190 million, up 24% year on year, net profit after deducting non-return to mother was 180 million, up 37% year on year; 23Q4 revenue of 760 million yuan increased 29%, net profit to mother decreased by 32%, net profit from non-return mother was 0.24 million, up 66% year on year.
The company's 23 annual dividend is 175 million, with a dividend rate of 94%. Assuming that the company's dividend rate continues in 2024, based on our current profit forecast, it corresponds to the current dividend rate of about 7%.
By business, revenue from leather used for shoe and bag straps was 1.87 billion yuan (69% of total revenue), an increase of 19.6%; revenue from leather for automotive interiors was 600 million yuan (22% of the total), an increase of 94%; revenue from raw materials for second-layer leather collagen products was 130 million yuan (5% of the total), an increase of 166%.
The gross profit margin for 23 years was 21.4% increased by 2 pcts, the net profit margin was 8.6%, and the gross profit margin of the company increased by 20.2% and 2.5 pct; the gross profit margin for 23 years was 21.4%, up 1.9 pcts year on year. Among them, the gross profit margin of leather for shoes and bags increased by 19.7% by 0.2 pcts, the gross profit margin of 29.9% of the raw material for two-layer collagen products increased by 6 pcts, and the gross profit margin of raw materials for two-layer collagen products was 12.2% and the gross profit margin decreased by 1.9 pcts.
The 24Q1 company's rate increased by 0.6 pct, and the 23-year period rate increased by 0.5 pct, mainly due to the increase in expenses such as sales and management remuneration, the accrual of equity incentive expenses, and the increase in interest expenses and exchange losses.
The 24Q1 net profit margin of 7.5% increased 0.4 pct, and 8.6% increased 0.1 pct in '23.
Hongxing orders have not faded off in the off-season. Recently, it was notified by downstream customers that Hongxing's revenue was 600 million yuan, up 95% year on year; net profit was 99 million yuan, up 237% year on year; 24Q1 revenue was 150 million, net profit was nearly 25 million, and gross profit margin was 30.6%. Although Q1 was a low sales season, Hongxing orders continued to grow well.
The company announced on April 11 that Hongxing recently received a designated notice for leather interiors from an automobile OEM. The project is expected to begin in March 2025, with a life cycle of 5 years, with an estimated total life cycle amount of RMB 1 billion. Furthermore, the company's customers' ideal models have reduced prices, which we believe may further boost sales growth and benefit Hongxing's sales.
We believe that Hongxing's advantages on the new energy vehicle interior circuit are showing, and its brand and delivery capabilities are gradually being recognized by more car companies and models. On the one hand, it is expected that the customer structure will be more diverse and healthy; on the other hand, benefiting from the growth in the scale of the industry, it is expected to create the company's second growth curve.
The competitive pattern of leather for shoes and bags has improved, and potential markets continue to be explored
In recent years, small and medium-sized enterprises in the tannery industry have improved, and the competitive pattern of the industry has improved. Although terminal consumption is relatively weak and downstream customers are cautious in purchasing, the lower price of finished leather products has highlighted its cost performance ratio, and usage in new categories such as white shoes, casual shoes, and sneakers has increased.
Overseas markets have recovered. On the one hand, brands are gradually replenishing stocks, and demand is improving; on the other hand, overseas brands are paying more attention to supply chain safety and stability, and delivery times have been shortened. As a leading leather products company, the company can better meet brand needs. The company is also increasing its efforts to expand overseas brands. Currently, it has entered the supply chain of many overseas brands, or is gradually contributing significantly.
Update profit forecasts and maintain “buy” ratings
Benefiting from the high growth in Hongxing Auto's interior leather business, we continue to be optimistic about the company's future growth potential. Considering the downstream recovery or slow recovery in shoes and bags in 24, we lowered related business revenue expectations and raised gross margin expectations based on Q1 performance. We expect the company's revenue for 24-26 to be 32, 3.9 billion, and 4.3 billion yuan (previous values were 3.4 billion and 4.3 billion, respectively), and net profit to the mother of 2.7, 3.4, and 4.1 billion, respectively (maintaining the previous 24-25 year forecast), EPS was 0.9, 1.2, and 1.4 yuan/share, respectively. 9x
Risk warning: Environmental policy risks; risk of product innovation and technological progress; risk of price fluctuations of major raw materials; exchange rate risk; risk of reducing the amount of natural leather used in uppers due to changes in fashion trends; risk of uncertainty about project development, etc.